Price Update Inventory Adjustments

[PartsPlant81]

How do you handle price updates month to month when the cost difference is negative?
For example just from this mornings update alone I have 3 different tires in stock that the price difference all went down for -$327.12 total. I obviously told my guys to continue to sell the tires at the price on our tire inventory sheet so we don't lose all of the money we have invested. That is just one example...I have 6 different numbers with a negative difference for the month...I am sure most of you have a lot more; we are a small dealer. Just wondering how you all handle it with your inventory. Thanks

[TimK]

What do you do for the parts that appreciate?
Do you sell them at the old lower cost and list price?

[PartsPlant81]

Absolutely not. But when we are $300+ in the hole we have to recoup some of those losses.

[TimK]

But what is it every month?

What is it net year to date?

For us, so far this year we've had one negative month and eight positive months.

Depreciation $645
Appreciation $10,081

I would sell the parts at the new price and move on.

[DMSOUTH]

Sell the parts at the new price is correct, but appreciation/depreciation has to be accounted for somehow--
I credit or debit account 688.........

[PartsPlant81]

Good points. It does get adjusted in accounting for physical inventory. I just wanted to see how you all handled it month to month. Thanks Tim K

[partking]

If any of the parts are to be sold under warranty, you have no choice but to use the new price or the claims will bounce.

But generally, over a year you will have more prices go up than down. I would have accounting make the changes in the total inventory value in the GL (for monthly reconciliation purposes). But rather than immediately book the difference to profit or loss, have them create an accrual account to use monthly for price updates and book the grand total to P&L at years end. It would be unusual for it to be other than a profit.

[FixedManager]

As already stated I adjust it in the GL and keep moving. Three hundred dollars is about 1/10th of 1 percent of the average inventory value and I am sure I've had more appreciation than depreciation in the history to worry about it.

The only thing out of the ordinary I might do is advertise the new lower price to gain interest and sales.

[Zep33]

Only times I've ever backed off their adjustments was a few years ago when they went with family pricing on all their pads and rotors and keys, Our depreciation, if left alone, would have cost several thousands, I waited until most of that stuff was sold before giving in and adjusting the pricing and did it a little at a time.

They also did that once with a lot of body parts and headlamps but I didn't stock most of that stuff.

I believe there were a couple threads about that here or on the old board discussing the situation

[steve@gmdealer]

Depreciation $645
Appreciation $10,081

Tim, What manufacturer are you with? I haven't seen that kind of appreciation in ages.